Oil endured another choppy session as traders took stock of China’s efforts to stimulate the economy and absorbed commentary from the head of the US Federal Reserve suggesting that further interest rate hikes are likely.
(Bloomberg) — Oil endured another choppy session as traders took stock of China’s efforts to stimulate the economy and absorbed commentary from the head of the US Federal Reserve suggesting that further interest rate hikes are likely.
West Texas Intermediate for August delivery was little changed near $71 a barrel after dropping as much as 0.6% earlier in the session. While China has taken a series of incremental steps to aid growth, there’s concern that its moves may lack sufficient punch.
While US policymakers kept interest rates unchanged at their meeting last week, in prepared remarks for the House Financial Services Committee Fed Chair Jerome Powell stressed the bank’s determination to curb inflation, saying that almost all FOMC participants “expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
Read More: Fed’s Powell Says Higher Interest Rates Needed to Curb Inflation
In recent days there have been signs of firmness in Middle Eastern crude markets. A flurry of buying from refiners in China and Japan, alongside busy trading activity in a key pricing window, has seen spot differentials for some grades double over the last week, an unusually large move over that time period.
Oil has dropped in the first half as China’s reemergence from its strict Covid Zero policies failed to gain traction and global crude supplies, including from Russia, proved abundant. In response, the Organization of Petroleum Exporting Countries and its allies announced supply cuts to try and tighten the market.
“We are increasingly doubtful that we will see a recession in the US,” Ole Hansen, head of commodities strategy at Saxo Bank A/S, said in a Bloomberg TV interview. “China simply cannot afford not to do additional stimulus measures, so we’re still looking for demand to recover in the second half.”
To get Bloomberg’s Energy Daily newsletter direct into your inbox, click here.
–With assistance from Yongchang Chin.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.